Foreclosures Soar in Region

Business New Haven
10/30/2006
by Liese Klein
A surge in the number of foreclosures on both the state and local level has real estate watchers worried that the trend may exert more downward pressure on housing prices.

Connecticut's foreclosure rate jumped 20 percent in the first nine months of this year compared to the same period in 2005, according to RealtyTrac, a California company that monitors foreclosures nationwide. With one foreclosure filing for every 1,000 households, the state had the 15th-highest rate nationwide. Massachusetts and Rhode Island saw even higher jumps in foreclosure rates.

With 372 homes in foreclosure in September, New Haven County ranked below only Fairfield in sheer numbers of foreclosures and hit a monthly high for the calendar year, RealtyTrac data shows.

Adjustable-rate mortgages, or ARMs, are a significant factor in the increase in the region, says Jeremy Shapiro, president of ForeclosureConn.com, which posts filings.

Low introductory rates have begun to expire on many ARMs issued in 2004 and 2005, and some homeowners are seeing their payments nearly double. Hardest hit are those with sub-prime loans, marketed to those with low incomes or bad credit, which have rates that often start at seven percent.

"There are spots of the country where certain loans were marketed more heavily," says Shapiro. "You have an appreciated housing market, then a cooling off."

Now, Shapiro says, "There are a lot of banks who lent to borrowers who aren't able to make good on their payments."

In Boston, another market squeezed by soaring prices and widespread sub-prime lending, foreclosures are up tenfold since 2004. Alarmed by the jump, Mayor Thomas Menino pulled together a coalition of banks and city agencies last month to offer strapped homeowners $100 million in refinancing.

For now, New Haven homeowners facing foreclosure are referred to Neighborhood Housing Services, according to Catherine Sullivan-DeCarlo, Mayor John DeStefano Jr.'s spokesperson.

High numbers of foreclosures can depress prices by flooding the market with discount-priced homes and raising the amount of unsold housing inventory on the market. It can also mean the end of the dream of homeownership for working-class families.

"A lot of them are bad loans they just can't afford," says Doris Latorre, national director of quality assurance for Acorn, a nonprofit agency focused on housing needs. From her base in Bridgeport, Latorre has seen a big jump in foreclosure calls from homeowners in all income brackets and from all over the region.

"We've got people who live in low-income neighborhoods and people who live in very affluent neighborhoods who've lost their jobs and are trying to get back on their feet," Latorre says. After a period where most foreclosure calls were from Waterbury, Acorn is now flooded with calls for help from Bridgeport, Fairfield, Stratford, Trumbull and New Haven, she adds.

Strapped homeowners must act fast to save their homes, Latorre says, and they should expect little help from state or city governments. "There's not a lot of help for people," she says. "There's no real program, there's no money."

"People really wait until the last minute; they don't understand how quickly it can happen," Latorre says.